Complaint No C08152 [2016] NZREAA 74 (11 April 2016)

Last Updated: 24 December 2016

Before the Complaints Assessment Committee

Complaint No: C08152

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee:

And

The Licensee

Licence number: XXXXXXXX

Licensee: The Agency

Licence number: XXXXXXXX

Decision to take no further action

11 April 2016

Members of Complaints Assessment Committee: CAC406

Chairperson: Paul Biddington Deputy Chairperson: Bernardine Hannan Panel Member: David Bennett

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 4 May 2015 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainant.

1.2. The Licensee is a licensed salesperson under the Real Estate Agents Act 2008 (the Act)

employed by at time of conduct by the Agency.

1.3. The complaint relates to a property (the Property).

1.4. The details of the complaint are that Complainant viewed the Property on 28 February 2014 and signed a sale and purchase agreement later the same day, with a condition allowing the Complainant and his solicitor seven days to consider information about the Body Corporate and insurance.

1.5. The Complainant claims he asked the Licensee both in person and by email whether there were any weather tightness issues with the apartment complex. The Complainant admits the Licensee disclosed that there had been some weather-tightness issues with Unit A and Unit C but claims she suggested these were linked to maintenance. The Complainant says the Licensee did not disclose the full extent of these issues, including the fact that the issues with Unit A had been noted on its LIM report and that a weather-tightness claim had been accepted in relation to Unit C. The Complainant says the Licensee did not disclose there were also weather-tightness issues with Unit B.

1.6. The Complainant claims he only found out about the extent of the weather-tightness issues in the complex after speaking to the owner of Unit C in July 2014. The Complainant alleges that even though his unit does not have any weather-tightness issues, he has received a valuation which states that because of the issues with the complex he may have paid $120,000 over market value. The Complainant believes the Licensee was aware of these issues as she has previously marketed several apartments in the complex.

1.7. In particular, the Complainant advised that:

a) The Complainant claims that he viewed the Property on 28 February 2014, and made an offer later the same day conditional on seven days to do due diligence on the Body Corporate minutes and insurance. The Complainant claims he asked the Licensee if there were any weather-tightness issues and the Licensee referred to a leak above Units A and C, but suggested this was linked to maintenance. The Complainant alleges this led him to believe the recent roof leak issue was a maintenance issue only, albeit in an area which had previously had water egress issues.

b) Whereas the Complainant accepts that the Licensee disclosed that Unit A had a previous Weathertight Homes Resolution Service (WHRS) claim, the Complainant alleges that the Licensee told him the claim had been withdrawn, while admitting that the Licensee told him she had no further information about this.

c) The Complainant also alleges that the Licensee did not disclose to him that weather- tightness issues in relation to Unit C had been considered by the WHRS, and claims that

the pre-contract disclosure documents in relation to the Property had no mention of any WHRS claims on this or any other units in the development.

d) The Complainant also alleges the Licensee did not disclose there were also weather- tightness issues with Unit B. The Complainant believes that the Licensee was aware of the water tightness issues with Unit B as this unit had been previously marketed by another agent from the same Agency, albeit a different branch, and a report about this from 2010 was available but not supplied to him.

e) The Complainant also alleges that the Licensee failed to respond to his email request of

1 March 2014, to provide a recap of the water tightness issues in relation to the

Property or to his email of 3 March 2014, where he stated he was confused about the information provided to date about water issues with the Property, seeking clarification.

1.8. The Complainant requests a remedy in that he seeks to have the Licensee referred to the Real

Estate Agent’s Disciplinary Tribunal.

1.9. The Licensee responded to the complaint against her.

1.10. In particular, the Licensee commented that:

a) The Licensee denies that there have been any breaches of the Act and claims that she disclosed all relevant information she had regarding the Property and the development in general.

b) The Licensee has provided some evidence of the sales history of units in the development and her knowledge of the issues raised by the complaint.

c) The Licensee advises that in relation to Unit A, she was aware that it had been listed in

2007 with an office of the Agency. A LIM report was obtained at that time. Nothing was

noted on the LIM report at that time regarding water tightness issues or claims. Following this listing, the property sold to Mr. and Mrs. X.

d) In 2013, the Licensee listed the apartment for Mr. and Mrs. X. The vendor did not disclose any defects to her or the Agency. The Body Corporate disclosure document of

12 November 2013 showed no WHRS claims. However, a further LIM report was received on 13 November 2013. This report showed a WHRS claim had been accepted on 16 June 2006 (claim number XXXX), decided eligible on 29 September 2006, and closed on 26 September 2007. Upon receiving this information the Licensee claims to have contacted Mr. X, who denied any knowledge of a previous WHRS claim. The Licensee checked Mr. X’s earlier 2007 LIM and no WHRS claims were noted on the first LIM report.

e) The Licensee alleges she then contacted the Body Corporate secretary who emailed her on the 21st November 2013 advising her that the Body Corporate only became aware of this claim when it was carrying out recent EQC repairs. The claim was not lodged by the Body Corporate and must have been lodged by the unit owner at the time. The Body Corporate claimed its disclosure statement was correct in that it had not been made aware of the WHRS claim when it was issued.

f) The Licensee alleges she then contacted WHRS directly and quoted claim number XXXX. The Licensee was advised there was no file and they did not have any further information. The Licensee then recommended to Mr. and Mrs. X, the vendors at the time, that they obtain a building report.

g) On 27 November 2013, the Company carried out an inspection of Unit A. This report shows the Company found elevated moisture readings on the top floor ceiling below the guttering, the Company claims, due to a build up of debris in the gutters causing

water ponding. The roof had been repaired above Unit C and a cut in the butynol was found. The report recommended the guttering required cleaning and re-sealing. The report stated the unit was not a leaky building. A report was provided to all potential purchasers and the agents of the buyers of Unit A. On 5 December 2013, Unit A was sold by auction for $485,000.

h) In relation to Unit B, the Licensee claims that she is not aware that on 25 June 2013 an office of the Agency listed Unit B. The Licensee admits that she is now aware that it was noted on the agency agreement that there were weather tight issues with this unit. The unit did not sell and was withdrawn from the market. The Licensee claims that she was not involved in this listing, attempted sale or withdrawal, and did not view the property and therefore had no knowledge of the issues alleged.

i) In relation to the Property, the Licensee admits that in May 2009 she sold the Property to Mr. and Mrs. Y for $299,000. There were no water tightness issues raised throughout the purchase.

j) The Licensee claims she was asked to relist the Property in 2014. The Licensee also claims that since the 2010 earthquakes she approaches all listings afresh and had Mr. and Mrs. Y confirm that they were not aware of any defects that including those that would affect water-tightness. On 20 February 2014, the Property was auctioned but was passed in. The Complainant made a conditional offer on the Property on 28

February 2014, subject to him carrying out his own due diligence.

k) The Licensee admits she did not pass any reports on to the Complainant but claims she referred him to the Company and Mr. W who had previously complied reports.

l) In relation to Unit C, the Licensee claims that she met the owner of Unit C at a bank branch during the time period she listed the Property. This owner informed her that she had undertaken repairs to her roof. The Licensee claims that the owner of Unit C never mentioned a weather tight claim in relation to Unit C or any other unit. This owner had recently sold her unit privately. The Licensee claims that the first time she heard of a WHRS claim over Unit C was when she received this complaint and that she has not seen any documentation about this WHRS claim.

m) Further, in relation to Units D and E, the Licensee is aware that the Agency listed these for sale in 2003 and 2008. The Licensee cannot recall the particulars of these listings, but has reviewed the records held and there is no information on these records about any weather-tightness issues.

1.11. The Branch Manager for the Agency also responded to the Committee and denies any wrong doing.

2. What we decided

2.1. On 26 May 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2. On 26 May 2015 the Committee also decided to, on its own initiative, pursuant to s78(b) of the Act, to inquire into the conduct of the Agency.

2.3. On 3 March 2016 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.4. The Committee has decided to take no further action on the complaint.

2.5. The Committee has decided to take no further action against the Agency.

2.6. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. In particular Rules 6.2, 6.4, and 10.7.

3. Our reasons for the decision

The Committee concluded:

3.1. The Committee was not satisfied that the Licensee or the Agency has failed to meet any of the required standards of professional conduct or failed to disclosure defects as required under the Act.

Standards of professional conduct

3.2. Rule 6.2 and 6.4 require a licensee to not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.

3.3. The Complainant alleges that the Licensee misled him as to the condition of other units in the development and did not provide him with all the information he was entitled to know in relation to these units prior to purchase. The Committee has carefully considered all the evidence before it in this matter. The Committee accepts that the Complainant was not told the particulars of water egress issues in relation to Units A, B, and C. However that is not the question before the Committee. The Committee must be concerned with whether the Licensee has withheld information that she knew or ought to have known and that in fairness she should have provided to the Complainant.

3.4. In deciding this matter the Committee has considered the information the Licensee had available to her, whether the Licensee provided sufficient information to alert the Complainant to known issues with the dwelling, and whether it was reasonable for the Licensee to expect the Complainant to follow up on the issues he was alerted to, himself.

3.5. The Committee is aware that the Complainant is himself a licensee and can be expected to have some knowledge of the industry. The Complainant is also persuaded that the Licensee did inform the Complainant of some water egress issues with Units A and C. Further, the sale and purchase agreement shows that the Complainant’s offer was conditional on him undertaking his own due diligence on the Property.

3.6. The onus of proof rests on the Complainant to substantiate his allegation that information was knowingly withheld from him. On the evidence before the Committee, the Committee is not persuaded that the Licensee has knowingly withheld information that she was aware of. The Committee accepts that the Complainant believes that the Licensee had more information available to her than was disclosed; however the evidence does not support this claim. In particular, the Committee is persuaded by the Licensee’s evidence in regard to Unit A. The Committee is persuaded that the Licensee told the Complainant that she had no further information on the water egress claim made in relation to Unit A, and she did not. At that point the Complainant was in a position to make further inquiry if he wished. That he failed to do so is not evidence that the Licensee knowingly withheld information from him.

3.7. It may be that the Complainant would have preferred the Licensee to view the Body Corporate minutes for the March 2008 and April 2009 meetings to gain further information on this matter; however the Committee is not persuaded by the Complainant’s submission that any listing agent would have sighted these minutes. There is no evidence that the Licensee withheld any information available in these minutes or that she wilfully determined not to sight them. The question simply never arose. Further, the Complainant, in making the purchase subject to his own due diligence regarding the Body Corporate and insurance, would lead any licensee to consider that he had taken this obligation on to himself.

3.8. The Complainant also has considered the Complainant’s allegation that the information supplied about Unit A was confused with water egress issues with Unit C. Both the Complainant and the Licensee have given evidence in regard to this matter and it is clear on the evidence, as stated above, that water egress issues were disclosed by the Licensee and the Complainant was given time to undertake further investigation into this matter himself.

3.9. The Complainant also alleges that the report given to him in regard to the Property did not disclose water egress issues but was simply related to the shower unit. However the Complainant was still entitled to being told of this report and was. Failure to disclose this report could have given rise to further complaint. The Committee does not see the disclosure of this report as misleading.

3.10. Further, the Committee is not persuaded by the Complainant’s allegation that the Licensee was selective and misleading in her emphasis on the assessor, Mr. W's, report that it was not a leaky building. The report was brought to the Complainant ’s notice and he was given Mr. W’s contact details. Had the Complainant wished to pursue this matter further or to determine himself whether the apartment complex had any leaky building issues, the Complainant had both the information and time to do so.

3.11. The Committee has also considered the Licensee’s response to the questions put to her by the Complainant on 1 March 2014. The Licensee admits she did not respond to this request in writing but claims to have had discussions with the Complainant after this date. The Committee may accept that it is not best practise not to respond in writing when such requests are made, however a failure to follow best practise is not the same as providing false information or failing to provide information a party is entitled to. In this case the Complainant obviously had concerns regarding water-tightness issues. He asked for additional information from the Licensee and none was forthcoming. At this point the Complainant had time to consider his options. The Committee is not persuaded that in this instance a failure to reply amounts to unsatisfactory conduct. A failure to reply is not misleading in this context, simply a little discourteous.

Disclosure of Defects

3.12. Rule 10.7 does not require a licensee to discover hidden or underlying defects in land but she must disclose any known defects to a customer. However, where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects, a licensee must either obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect or ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if he so chooses.

3.13. The Licensee has done both in this instance. The Committee accepts the Licensee’s evidence that when water egress issues were raised with her she went back to the vendors of Unit A and the Property to confirm that they had no issues they wished to disclose. Further the Licensee made inquires of the Body Corporate and WHRS. Admittedly some of the information she received was outdated and had changed, however all this information was passed to the Complainant and it was up to the Complainant what he did with this information. Further the Committee accepts the Licensee had no particular knowledge of the condition of Unit B, and Unit B was not raised with the Licensee prior to the sale.

3.14. Having reviewed the information the Complainant did receive, it is clear that it was sufficient to alert him to issues within the development even if not to the degree he would have wished. Further the Complainant had time under his conditional sale and purchase agreement to seek expert advice if he so choose. It appears he did not.

3.15. The Committee is not persuaded on the evidence that the Licensee has failed to disclosure any known defects or failed to give the Complainant an opportunity to make further investigation himself. The Committee understands that information the Complainant has received after the purchase of his unit leads him to reconsider the purchase price he agreed to, but that is not the same as proving that the Licensee is liable for this possible loss of value by not allowing the Complainant an opportunity to make his own inquires before purchase. The Complainant was alerted to water egress issues prior to purchase and has relied on his own judgement in setting the purchase price. The complaint is not proved.

The Agency

3.16. The Committee was not satisfied on the evidence before it that the Agency had failed to meet any of its obligations under either the act or the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012.

4. Your right to appeal

4.1. If you are affected by this decision of the Committee, you may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date of this decision (Section 111).

4.2. For further information on filing an appeal, read Guide to Filing an Appeal at Ministry of

Justice-Tribunals (www.justice.govt.nz/tribunals).

5. Publication

5.1. At the Committee’s discretion, the decision will be published without the names or identifying details of the Complainant (including the address of the Property), the Licensee, the Agency, and any third parties.

5.2. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Tribunal receives an application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

5.3. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also considers that publishing this decision helps to set industry standards and that is in the public interest.

Signed

Bernardine Hannan

Date: 11 April 2016

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

89 Power of Committee to determine complaint or allegation

(1) A Committee may make one or more of the determinations described in subsection (2) after both inquiring into a complaint or allegation and conducting a hearing with regard to that complaint or allegation.

(2) The determinations that the Committee may make are as follows:

(a) a determination that the complaint or allegation be considered by the

Disciplinary Tribunal:

(b) a determination that it has been proved, on the balance of probabilities, that the licensee has engaged in unsatisfactory conduct:

(c) a determination that the Committee take no further action with regard to the complaint or allegation or any issue involved in the complaint or allegation.

(3) Nothing in this section limits the power of the Committee to make, at any time, a

decision under section 80 with regard to a complaint.

111 Appeal to Tribunal against determination by Committee

(1) A person affected by a determination of a Committee may appeal to the Tribunal against a determination of the Committee within 20 working days after the date of the notice given under section 81 or 94.

(2) The appeal is by way of written notice to the Tribunal of the appellant's intention to appeal, accompanied by—

(a) a copy of the notice given to the person under section 81 or 94; and

(b) any other information that the appellant wishes the Tribunal to consider in

relation to the appeal.

(3) The appeal is by way of rehearing.

(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the determination of the Committee.

(5) If the Tribunal reverses or modifies a determination of the Committee, it may exercise any of the powers that the Committee could have exercised.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012 are:

Rule 6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

Rule 6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.

Rule 10.7 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects, a licensee must either—

(a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.